Stop 'regulatory assault' on Chinese companies, says Global Times on Xiaomi India case

Global Times, China's state-run newspaper, said on Monday that smartphone maker Xiaomi Corp has come under intense regulatory pressure in the Indian market, raising concerns over Chinese companies' development in India.

While it is premature to claim whether India is intentionally targeting Xiaomi now, uncertainty surrounding Xiaomi's regulatory predicament should raise a red flag for India, the Communist Party's mouthpiece says in an editorial.

What happened to Xiaomi could be seen as another example of "India's crackdown on Chinese companies", the opinion piece says, adding that no one knows whether such an event of business hostility would lead to more Chinese companies there subject to growing regulatory scrutiny in the Indian market in the future.

This comes weeks after the probe agency summoned Xiaomi's global vice-president Manu Kumar Jain for alleged contravention of the foreign exchange law. Jain, the former India head of Xiaomi, was questioned about the India operations of the company.

On May 7, the Enforcement Directorate (ED) refuted the allegations that the statement of the officials of Xiaomi India was taken under coercion.

Calling the accusations as "untrue and baseless", the probe agency says the officials of Xiaomi India deposed their statements before ED under FEMA voluntarily in the “most conducive environment” on various occasions.

The statements were deposed by them on the basis of documents provided by the company during the course of investigation, ED says, adding that their statements corroborate with the written replies submitted to the ED and the materials on record.

No complaint was filed by Xiaomi India at any point of time during recording of statements at various occasions, the investigating agency says, adding there was no coercion or threat to the officers of the company at any point of time.

"Last statement of the officials of the company was recorded on 26.04.2022 and the seizure order was passed on 29.04.2022. It appears that allegation now made after passage of substantial time is an afterthought. The allegations are baseless and far from the facts," ED says.

The Enforcement Directorate launched an investigation into the alleged illegal remittances in February this year.

On April 30, the ED seized a sum of ₹5,551.27 crore deposited in bank accounts of Xiaomi Technology India Pvt Ltd.

The seizure was made under the provisions of Foreign Exchange Management Act, 1999, in connection with the alleged illegal outward remittances made by the company, the probe agency said last month.

The company has remitted foreign currency equivalent to ₹5,551.27 crore to three foreign based entities which include one Xiaomi group entity in the guise of royalty, it added.

"Under the cover of various unrelated documentary façade created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute violation of section 4 of the FEMA," ED said. "Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities."

Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred, the probe agency said. "The company also provided misleading information to the banks while remitting the money abroad."